from the business-models-in-action dept

Every time we talk about music industry business models, we get some folks who have to chime in with some claim about how musicians should be able to sell their music just like they have for years. Of course, the truth is that it's quite rare for any musician to make money from selling their albums, as has been pointed out for years. The latest to make that point is Lyle Lovett. Reader Rose M. Welch sends us this link to a story about Lyle Lovett, pointing out that in two decades of making music, selling 4.6 million albums, he's "never made a dime" from album sales, but has instead used those record sales to make money on tour:

"Records are very powerful promotional tools to go out and be able to play on the road..."

He does go on to say, however, that he thinks music sales should be self-sustaining. Of course, if he can make money from playing on the road, and giving away the music means it's an even more "powerful promotional tool," then why not focus on that? At least he seems open to new ideas:

"If a major label is interested in working with me after these next two records and is able to come up with a strategy that does engage some of the new technology in a way that can benefit everybody, I'd be very interested in that."

The problem, of course, is that most record labels aren't looking at using technology in a way that can benefit everyone. In the mind of your typical record exec, it's the recording industry against anyone else -- and if others are benefiting, that's a sign that the industry is losing. The idea that everyone can benefit doesn't even register.

Reader Comments

too bad

It's just too bad that Lyle thinks he needs to stick with a "major" label. There are smaller labels out there that would more than willing to make sure he gets money from album sales (or singles sales, as the "album" is mostly a tool of the major labels). Alas, he wants to stick with the evil he knows instead.

At least he's getting filthy rich off touring. He can't really complain about that, I guess.

Point is many people don't need the labels to promote or distribute effectively. Think of a label as a group that accomplishes those two goals: Promotion and distribution. YouTube, MySpace, Apple, Amazon, and Cafe Press offer good alternatives. A lot of this can be done online, in one form or another. Sure, it may cost more up front, but you retain rights to associated revenues.

I wonder if he was serious when in the contract, he mentioned he needed "Horse and Buggy with driver (must be Amish)" LOL!

Re: too bad

I totally agree! And most music players (such as WMP, the mian culprit) want to organize by album. When you search or view by artist or genre, you ALWAYS seem to have an album sub-genre that you have to dig through before you can get to the music. The horrible part is that even when I purchased albums, I only ripped and listened to a few tracks so most of the album folder have maybe three songs in them. Arrgh!

It just goes to show how the different what we want is, from what the industry thinks we want and wants to give us.

Re: Re: too bad

Funny, 99% of the music I buy is by the album (individual tracks make up about 80 of the 13000 or so tracks I own copies of, mostly from CD, but also from eMusic and Mindawn).

I guess the difference is finding artists who don't suck.

The per track model is a valid one however, and it justly punishes those marginal artists who can create one "hit" and pad the CD out with filler. However, the recording industry is still refusing to adapt to a changing world. Fortunately, the asteroid hit about 10 years ago and the dinosaurs don't have much left time to live.

Didn't Nine Inch Nails do that already? They have released at least one album free (in a variety of formats) and others at pay what you want type deals. They depend on concert sales. When they come back my way I will certainly be going to another show( the last one kicked a$$. But has that helped execs see the light? Probably not. They tend to see what they want to, as do most people.

Albums Sold

You got that right. The Beatles started their own recording company because they could.

I lot of musicians don't mind working to earn their money (live tours) The Rolling Stones still do it after 40 years. The promotion from selling recordings, and the advertising and such, is what makes this worthwhile for the musicians, and not normally the income from recording sales.

The recording companies used to have a lock on this business model, and on the Golden Goose, because they controlled (could afford the recording and distribution technology). But the present internet/digital technologies are making that model obsolete, because there are now other distribution and promotion channels that by-pass the recording companies. They are no longer needed by either the music fans or the musicians. They just don't see their own irrelevance yet, but then again neither did the makers of horse buggies, when the automobile came out. There was also the same protectionist maneuvering back then.

I can see his point, actually; creating and maintaining a website offering a whole bunch of MP3s for download might cost peanuts compared to the infrastructure that goes into pressing a music CD, but it's still going to be a significant business expense, and charging just enough per download to cover the costs of the rack space -or the servers, T1 connection and service contract if and when things really take off- but knocking a few bucks off the price of a concert ticket is arguably a better deal for the consumer.

Re: No Money? Got to be BS!

"Where did the money go? Did Lyle just give it to the music publisher? Did the publisher give it to the distribution chain? Did they all give it to charity?"

You seem to be under the impression that Lyle had it in the first place. I think what you'll find is the money went from the resellers to the label, who paid for distribution, marketing and other expenses before pocketing the profit themselves.

The point here is that although you could release an album on P2P and use free marketing techniques, thereby incurring no marginal cost for the album, there's still value in a label being able to manage distribution deals (for the music and for associated goods/services) and marketing, but that a label providing these services shouldn't be relying on taking all profit from record sales because the economics on that don't work.

Re: No Money? Got to be BS!

Hi! You must be nescient

Allow me to apprise you:

The major record labels (repeatedly and as a matter of standard operating procedure) screw over their stars. The record label will pinch a little brown loaf into their outstretched hand when the album is recorded, and then keep all the money from the album's sale. Of course, they don't call it "keeping," (or even "we're going to screw you in your contract",) they call it bullshit like: administrative overhead, distribution costs, material delivery fees, etc, etc. In the contract, all the money which would have gone to the musician instead goes to COSTS. The other money, called "PROFIT" is kept by the label.

I hope this has been enlightening.

Should you have trouble understanding, develop your musical talent and sign on with a major label! :)

Re:

I can't believe the Lyle Lovitt isn't making money from album sales based on works he did 20 years ago. If record companies want to ink a deal with an artist that obliges the artist to produce 1 to 4 albums for say $1M upfront, and then allows the companies to keep the masters and exclusive release for up to 20 years, then that's between the artist and the company.

Where the damn line should always be drawn is when the media companies start to dictate limitations to tech companies - which is exactly what they did with DRM, Macrovision and SCMS (anyone remember that?) among others.

What he fails to mention...

is that despite the fact that he may not make money based on actual product sales, he probably does make a considerable chunk of change from the record companies for the publishing rights to the songs he's written. At least if he didn't sign away those rights as so many recording artists have.

Lie,Lyle,Lie

Sorry Lyle I'm sure your accountant tell's a different story, like W's dry holes the money comes back to you in ways only your CPA can dream up.So have him route 50,000 to my food bank,I'm sure you could use another deduction!

Anonymous Coward - one can give away money before one has it, by contract. This is what I was suggesting. Please save your condescending Business 101 lessons for another site.

Evil Mike - I appreciate your confidence in my ability to sign with a major label, but your assumption that only you read newspapers is unwarranted.

Stephen Wiesemann - Agreed. Why do you think it is so easy to believe that someone who could sell 4.6 million albums and marry Julia Roberts, all while looking like a dockworker's boot-heel, could manage to make less money in 15 years of album sales than a third-place finisher from American Idol can make on his signing bonus?

So Where Did That Money Go?

In defense of the (traditional) major label business models, please keep in mind that 4.6 million units sold over 20 years is next to nothing for a major act. 230,000 units per release will keep the lights on in the house, but won't get new carpeting for the bedroom.

My guess is that tour support, promotional expenses, and just plain lousy business decisions, on the part of everyone involved, ate up most of the money. If Lovett got $0.75 to $1.00 per unit sold, that money would easily get eaten up with the list of dozens of advance expenses. Any artist manager, producer, or promoter will tell you that you don't pay the bills until after 300,000 units of a release are sold, and the artist won't see any real money until after 500,000 to 800,000 units of a release are sold.

With all the gripes to be laid to bare about labels, this is not a good example. Just let me say that I have never bought, and probably never will buy, a Lyle Lovett album. But, I've seen him 3 times over the years at an average cost of $35 per ticket, $70 per show including my dates (and by the way, he was great!). So leave this one alone, folks. Bad example.

Record labels are dying

My peanut gallery view would suggest that big labels must either drastically evolve or die. They are trying to use the law to prop up their dying industry until they figure out how to evolve. If they choose not to evolve they will die a slow death because they are such fat cows it will take them awhile to burn through all their assets. They will continue to be a drain on society until society chooses not to care about them or investors realize their stock is over valued and force the companies to fill a non-legally-propped-up-niche.

Musician's Business Model

I came up with the free music over the Internet as self promotion and make money touring model several years ago (assuredly I was not the first or only person to do so) and it makes more sense now than ever.

If it wasn't for the record companies' control of media and, to some extent, government through threats, bribes, and taking advantage of vices the recoding industry would have ended years ago.

As for Mr. Wilkins comments (17 "So Where Did That Money Go?") I disagree that this is a bad example. I say it is typical of what I have observed. In a 60 Minutes in 2007

sister Natalie comments that they had been the biggest selling band in country and had one of the best recording deals ever negotiated, but had only $10, 000 in the bank from it. All of the money they made was touring.

Another example is the Rolling Stones. They all became very rich through years of touring the World, not from record sales.

Re: Musician's Business Model

I just want to reply to what you said here. With the assumption that Lyle Lovette averaged 230,000 units per release (it was obviously more or less), the $200,000-ish dollars he may have earned for each release would never have gotten to him. They would have gone to tour support/advances.

But, a band that sells 2 million records from 'one release' has a completely different set of math models. A band with 2 million sales will have 10+ times the expenses (and different profit margins as sales increase), thus more money pulled from their percentage of sales to pay larger scale touring expenses.

Sure, lots of major labels cheat their artists for many reasons. That's why the biggest artists usually demand $2 to 3 million on delivery of masters- a loose way of saying; "Give me that advance and you can go make what you want". They know that they will get raped without that advance.

I am not an advocate for major record companies. Just run a Google of 'Melted Metal Web Radio' and you will see what I think of them. But, unless you have run a record company, or managed a mid-sized to larger-sized band, it is impossible to understand the dynamics of the cash flows involved.

Quite simple, really.

Here's the problem:

For all intents and purposes, The Music industry has lost it's corner on the market-- means of production and is trying to re-secure it by way of the legal system. However, by leveraging the legal system, it is entirely too expensive for a mass-produced $12.99 product such as CDs.

What was once expensive to produce (Vinyl LPs) is now cheap an within reach for the masses (Digital Downloads).

By continuing to believe the only way to legitimately own a sound recording is by producing a piece of plastic in a court of law is silly, but why not. If the goal is failure, it's certainly attainable.

Keep it up. New businesses will be created out of RIAAs failure to adapt.

"Again, from personal experience: in 37 years as a recording artist, I've created 25+ albums for major labels, and I've never once received a royalty check that didn't show I owed them money."

"However, I object violently to the pretense that they are in any way doing this for our benefit. If they really wanted to do something for the great majority of artists, who eke out a living against all odds, they could tackle some of the real issues facing us:

The normal industry contract is for seven albums, with no end date, which would be considered at best indentured servitude (and at worst slavery) in any other business. In fact, it would be illegal.

A label can shelve your project, then extend your contract by one more album because what you turned in was "commercially or artistically unacceptable". They alone determine that criteria.

Singer-songwriters have to accept the "Controlled Composition Clause" (which dictates that they'll be paid only 75% of the rates set by Congress in publishing royalties) for any major or subsidiary label recording contract, or lose the contract. Simply put, the clause demanded by the labels provides that a) if you write your own songs, you will only be paid 3/4 of what Congress has told the record companies they must pay you, and b) if you co-write, you will use your "best efforts" to ensure that other songwriters accept the 75% rate as well. If they refuse, you must agree to make up the difference out of your share.

Congressionally set writer/publisher royalties have risen from their 1960's high (2 cents per side) to a munificent 8 cents.Many of us began in the 50's and 60's; our records are still in release, and we're still being paid royalty rates of 2% (if anything) on them.If we're not songwriters, and not hugely successful commercially (as in platinum-plus), we don't make a dime off our recordings. Recording industry accounting procedures are right up there with films.

Worse yet, when records go out-of-print, we don't get them back! We can't even take them to another company. Careers have been deliberately killed in this manner, with the record company refusing to release product or allow the artist to take it somewhere else.

And because a record label "owns" your voice for the duration of the contract, you can't go somewhere else and re-record those same songs they turned down.

And because of the re-record provision, even after your contract is over, you can't record those songs for someone else for years, and sometimes decades.

Last but not least, America is the only country I am aware of that pays no live performance royalties to songwriters. In Europe, Japan, Australia, when you finish a show, you turn your set list in to the promoter, who files it with the appropriate organization, and then pays a small royalty per song to the writer. It costs the singer nothing, the rates are based on venue size, and it ensures that writers whose songs no longer get airplay, but are still performed widely, can continue receiving the benefit from those songs."

Keep at it

Songwriters

In response to giving away the music for free, to use as promotion to support a tour, you are assuming that the artist and songwriter are the same, and they have the right to give away their own property. The fundemental problem with this model is that many times the artist os not the writer and owner of the copyrighted songs on the cd. the majority of consumers of music are not educated or aware of what it means to make a living as a songwriter, a crucial part of the creative drive in music, and how they of course own the songs they create, and need to somehow find a way to retain their songwriting royalty stream as artists make millions in merchandise, touring, and record sales from the songs they have written. Songwriting is a craft as important as singing and performing, and a crucial element to the music world that cannot afford to break down.